All Forum Posts by: Jaquon Miller

@Jaquon Miller so it sound like they are charging 1% and giving you a lender credit of 1%?

@Jaquon Miller what kind of lender fees come with the 5.75% rate? 

Hey Jaquon, I specialize in VA loans. Do you have a disability rating? How much sooner into the future are you going to pick up a second place. I would recommend just going conventional now if it's within the next couple years. Saves you from the fees and unnecessary churn.

@Jaquon Miller

Depends on your long term goals but based on what you wrote, I would strongly consider refinancing

It sounds like a decent idea to put that $100,000 to work by helping fund down payments for fix & flip projects. You might want to consider setting this up through an entity like an LLC for asset protection and tax benefits. You could look at charging interest plus getting a percentage of the profits, which boosts your potential earnings. Remember, there's an added risk if you're stepping in as a second mortgage holder. If things go south and the property is sold off due to a default, you'll be second in line to get paid. If the first mortgage takes most of the property value, you might not see all your money back. So, it's crucial to have clear agreements and carefully vet the projects to manage these risks effectively.

% in the profits makes you a partner instead of a lender.

Return on a CD is around 5% so you likely want atleast 8% to cover the risk, ideally 10%+

The gap investors I have worked with usually receive an 8-12% return as mentioned here, and are usually done as an individual in my experience. Best of luck! 

If the investor is using a HML, offering a second position may be challenging as most lenders prefer to be the sole lien holders. For example, say the investor is requesting funds for a rehab draw and they utilized a GAP loan. This could potentially lead to complications such as frozen funds when mechanics liens are searched and they see the 2nd lien. However, if you're open to a silent second position via a promissory note, it may be feasible.

Determining whether to invest as an individual or entity is a question best addressed by your attorney and CPA. In my experience offering GAP loans, I typically charged between 12-15% interest and 3 points due to the loan size. Bridge loan rates have ranged from 8-12% depending on market conditions and the cost of capital.